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Structural Reforms and Regional Convergence
... 3 Countries with larger regional disparities experience lower long-term growth (Che and Spilimbergo 2012). adverse economic shocks that have impacted particular regions. ...
Rising inequality and widespread poverty, social unrest and polarization, gender and ethnic disparities, declining social mobility, economic fragility, unbalanced growth due to technology and globalization, and existential danger from climate change are urgent global concerns of our day. These issues are intertwined. They therefore require a holistic framework to examine their interplay and bring the various strands together. This book brings together leading academic economists and experts from several international institutions to explain the sources and scale of these challenges. The book summarizes a wide array of empirical evidence and country experiences, lays out practical policy solutions, and devises a comprehensive and unified plan of action for combatting these economic and social disparities. This authoritative book is accessible to policy makers, students, and the general public interested in how to craft a brighter future by building a sustainable, green, and inclusive society in the years ahead.
... 3 Countries with larger regional disparities experience lower long-term growth (Che and Spilimbergo 2012). adverse economic shocks that have impacted particular regions. ...
The past two decades have seen a rapid increase in interest in financial inclusion, both from policymakers and researchers. This chapter surveys the main findings from the literature, documenting the trends over time and gaps that have arisen across regions, income levels, and gender, among others. It points out that structural, as well as policy-related, factors, such as encouraging banking competition or channelling government payments through bank accounts, play an important role, and describes the potential macro and microeconomic benefits that can be derived from greater financial inclusion. It argues that policy should aim to identify and reduce frictions holding back financial inclusion, rather than targeting specific levels of inclusion. Finally, it suggests areas for future research.
The chapter discusses regional disparities in economic performance and living standards. It first sets out some key facts and provide a conceptual framework to help analyze whether such disparities are efficient, or instead reflect market and/or policy failures. It examines whether policy attempts to reduce regional disparities necessarily involve a trade-off between equity and efficiency. The chapter then investigates whether policymakers should focus on boosting the economic performance of lagging regions—or, conversely, accept the presence of regional disparities, and instead assist households in lagging regions through transfer payments, investments in education, health, and other basic services, and by facilitating out-migration.
The proponents of decentralization argue that it improves economic growth, while critics say it increases regional inequality. The empirical evidence is mixed and based mostly on developed countries due to a lack of income data for lower administrative regions. We combine night‐lights data captured by satellites with a new database on decentralization derived from actual laws that are institutionalized and circumscribed from a global sample of countries. We then analyze the impact of decentralization on regional convergence using income data from the first and second administrative regions. We find that decentralization hinders within‐country regional convergence, especially in the developing countries.
Using a panel of 265 regions from 24 OECD countries from 1997 to 2007, we explore the impact of nation-wide macroeconomic and structural policies on the productivity growth of subnational regions. We find that average relationships between nation-wide policies and regional productivity growth can hide strong differentiated effects according to the distance to the frontier: relaxing employment protection legislation on temporary contracts, lowering barriers to trade and investment and increasing trade openness enhances productivity growth in lagging regions, whereas reducing barriers to entrepreneurship or higher levels of government debt has a positive effect on regions closer to the productivity frontier.
For the Western Balkan countries, the transition from socialism to capitalism and democracy has less easy than in other parts of Emerging Europe. Fifteen years of conflict have been a tremendous burden to carry for the people of the Balkans. But once the war ended and peace returned, these resilient countries and communities did more than rebuild: they began a transformation into market economies, liberalizing prices, privatizing many state and socially-owned enterprises, and building the institutions needed to support a market economy. Then came the challenge of enlargement: to access or not to access the Europe Union? Enlargement of the EU is theoretically possible to any European country that respects democratic principles, operates in the free market and wishes to comply with the previous and existing EU laws by attempting to implement those. However, no matter if the country is European or not, it has to be subject to a political assessment by the EU institutions that would evaluate the level of the country’s adherence to the above conditions.
The current economic crisis has had spatially differentiated impacts in both the US and Europe. A growing collection of literature investigates the determinants of the magnitude of this recession across regions. This paper aims to contribute to this literature by analysing variations in unemployment rate across European regions over the period 2004–11. In particular, we focus on two apparently neglected issues, namely labour market rigidity and the sensitivity of the local economy to the national or European business cycle. The rigidity of the labour market is increasingly viewed as a possible reason for differences among countries in terms of the performance of labour markets, although existing empirical evidence remains inconclusive. In this respect, our aim is to assess the relevance of national labour legislation, as measured by the OECD Employment Protection Legislation (EPL) Index for the performance of regional labour markets by taking advantage of the natural experiment provided by the crisis. Furthermore, for the first time in economic literature, we employ quarterly data on unemployment rate for all European regions over the period 2000–11 to construct an index of co–movement regarding regional cycles with national or European cycles, to be used as an important determinant of variation in the unemployment rate. After controlling for a number of covariates, as well as for spatial dependence in various forms, our results indicate that EPL did not affect unemployment growth over the entire period. However, we did find that regions with a low long–term unemployment rate in countries with high EPL performed better in the pre-crisis period (2004–07), whereas no effect was found during the crisis. We also found that synchronisation of the regional cycle with the national one was significant for explaining regional labour market performance. Taken together, these results denote the limited relevance of national policies and legislation for accommodating spatially differentiated shocks, whereas policies aimed at modifying local cycles may prove to be more effective.
This paper assesses the effect of sub-national institutions on the economic performance of Russia's regions (oblasts, republics, krais and okrugs) from 2001 to 2008, a period of rapid economic advancement and recentralization. Approximating sub-national institutions with the RA Expert index of investment risk, we find that a reduction in investment risk by one standard deviation increases output by 1.4 percent in the short run and 11.9 percent in the long run, suggesting a substantial regional performance gap in government practices, despite intensive political recentralization. Assuming that the main components of effective governance are running satisfactory public health programmes aimed at decreasing overall mortality among the working-age population, creating fair labour market conditions and improving the regional institutional climate to encourage investment in fixed assets, we argue that sub-national institutions remain important for growth in post-Soviet Russia after 2000. This paper contributes to the literature on institutional persistence.
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